Advantages & Disadvantages of Sale of Assets

Both businesses and consumers collect assets over time. For businesses, it might be the vehicles and equipment used to perform work, or the computers and printers located throughout an office. For consumers, though, it's everything in and around the home they own or rent. If a business closes or a homeowner needs to offload those assets quickly, a sale can be the quickest route. But before you plan an asset sale, it's important to know the pros and cons. Although there are a few caveats, you might decide that donating or loaning your assets to a trusted relative is a better option, based on your own needs.

Advantages & Disadvantages of Sale of Assets

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Quick Money

The biggest advantage of an asset sale is the money you'll have on hand once everything is finalized. You can use the money towards a down payment on a house, or put it toward paying off your debt or purchasing new assets.

Rapid Disposal of Assets

Often if you're interested in getting rid of a large volume of items at once, an asset sale can be the best option. Before moving or selling the property of a deceased loved one, for instance, an auction can bring in numerous potential buyers so you could have everything sold in a matter of hours. This is much more efficient than trying to sell and give away a house full of items.

Disappointing Results

Unfortunately, asset sales don't always bring in top dollar for each item, especially if you're selling multiple items at once. For business asset sales, experts recommend pricing each item individually, and you can apply this same concept to personal asset sales. If you're responsible for setting the price for each item, use sites like Craigslist and eBay to monitor the going rate for used items like yours. If you have valuable assets like antiques, it might be worth getting an estimate from an appraiser before the sale date.

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Tax Repercussions

Before you sell any assets, make sure you understand what capital gains tax may apply. If you own an asset for less than a year, what you make will be classified as a short-term gain. Otherwise, it's a long-term gain. Everything you own is considered an asset and therefore the capital gains on all of those items are taxable. However, if you lose money on the sale of personal assets, you can't claim that loss on your taxes.

Selling assets can be a great way to bring in money while also offloading personal property. It's essential though to understand the tax repercussions of making money on such a sale before putting your items on the market, since you may find that the tax you'll owe will dramatically cut into any profit you'll make.